PwC insurance experts comment on Captive Insurance Consultation response and Financial Services Growth and Competitiveness Strategy

On the Financial Services Growth and Competitiveness Strategy, Alex Bertolotti, Insurance leader at PwC UK, commented:

“Today’s strategy is a clear vote of confidence in the UK’s insurance sector and recognises the pivotal role UK insurance and the London Market plays both domestically and internationally. It recognises our global leadership and backs it with meaningful reform. The emphasis on cutting complexity and speeding up approvals will help position UK insurers competitively in a fast-changing global market.

“With climate, cyber and infrastructure risks on the rise, these proposed reforms could position the UK to lead the next wave of insurance innovation.

“The focus on investment in talent and regional financial clusters is particularly relevant for the insurance sector given its geographically diverse footprint in the UK and will support long-term sector growth.

“The biggest challenge will be driving strong coordination between government, regulators, and industry to meet the objective of reforming rapidly while protecting market integrity.”

On the consultation response on captive insurance, Andy Moore, Insurance Partner at PwC UK said: 

“It’s great news that the government has approved a captives regime. This move is an important step forward in addressing a gap in the UK insurance market’s toolbox. If implemented well, it should be a fairly straightforward way for the Government to tap into a huge market and drive growth for an already thriving and historic sector in the UK.  

“Crucially, to make the UK an attractive destination to set up or relocate captives, three key areas need to be addressed.  

“Firstly, the industry will welcome the acknowledgement of a need for a competitive solvency capital regime – at the moment, key competitor jurisdictions such as Bermuda and Guernsey apply capital standards to captives that are significantly lighter than required by Solvency II.  

“Secondly, the UK needs a smooth and efficient regulatory process - competitor jurisdictions have dedicated captive teams able to quickly authorise new captives and respond pragmatically to regulatory matters as they arise, so it is good to see this covered in today’s response.  

“Lastly, while broadly speaking the tax impact does not form part of the business case for implementing a captive insurance arrangement, overall tax position remains a component when choosing a jurisdiction. Global minimum tax does somewhat level the playing field between countries, however the UK will be less efficient than existing domiciles without some changes.” 

“Furthermore, we welcome the announcement of a consultation on reforms to improve the UK’s Insurance Linked Securities offer and how the future role of Protected Cell Companies could facilitate captive insurance business instead of risk transformation.”